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Investing Specialists

Revisiting the Case for International

Adding international stocks has some benefits, but it's not a magic bullet.

The case for diversifying an equity portfolio with international stocks seems straightforward enough. For one, the United States isn’t the whole world: U.S.-domiciled stocks made up only about 56% of global market capitalization as of Sept. 30, 2019. In addition, there have also been long stretches of time (such as the 1970s and 1980s) when international stocks have outperformed. Because they’re fundamentally different from equities based in the U.S., non-U.S. stocks shouldn’t perform in tandem with their domestic counterparts. Theoretically, then, diversifying a U.S.-focused portfolio with international stocks should boost risk-adjusted returns over time.